This battle, which in many ways mirrors similar struggles between record labels and online music stores, underscores some of the challenges that moving into widespread digital distribution for a formerly non-digital product can bring.

The Agency Model Conundrum

Recently, Macmillian's CEO John Sargent explained the agency model, as it relates to e-book sales, in his blog:

"Starting at the end of March, we will move from the 'retail model' of selling e-books (publishers sell to retailers, who then sell to readers at a price that the retailer determines) to the 'agency model' (publishers set the price, and retailers take a commission on the sale to readers)."

In other words, Macmillan wants to be able to control how much digital books are sold for on a per-book basis. Much like music publishers fought (and eventually won) the right to sell certain digital tracks or digital albums for more (or less, in some cases) than the $0.99 per track/$9.99 per album standard, publishers want that same control.

"At least one independent publisher of scale was told categorically by Amazon in a recent phone call initiated by the retailer that Amazon would not negotiate agency selling terms with any other publishers outside of the five initial Apple partners. This publisher was told that if they switched to an agency model for e-books, Amazon would stop selling their entire list, in print and digital form. In conversation, Amazon is said to have reiterated that as matter of policy they are declining to negotiate an agency model with any publisher outside of the five who have already announced agreements with Apple's iBookstore."

In other words, the agreements that have been made with the five publishers signed to work with Apple — Macmillan, Harper Collins, Penguin, Hachette, and Simon & Schuster — will not be passed on to smaller publishers.

It seems even the agreement with the other four publishers outside of Macmillan (known as Agency Four) isn't set in stone.

Cader also writes:

"The indications are that if the Agency Four have not finalized new digital sales agreements with Amazon prior to the launch of Apple's iPad, they could face delisting from direct sale at Amazon, as Macmillan did."

Translation: If those publishers don't finalize a new digital agreement with Amazon before the launch of the iPad, they risk being removed from Amazon.com

Amazon Is Biggest Now, But For How Long?

Because it is both the biggest seller of e-books and print books, Amazon has enormous power in the publishing industry. However, it's unclear how long it will be able to play hardball with publishers, especially as formidable competitors like Apple (with iTunes) and Google emerge.

Apple, interestingly, held a reverse stance with music executives for many years before finally changing course in January of 2009 with the introduction of variable pricing. However, one reason Apple was able to exert so much influence over record labels pricing was because until Amazon launched its service (again, Amazon took the reverse approach with music, letting publishers set variable pricing for tracks and albums), there was no real competitor in the digital music space.

Amazon isn't quite as lucky. First, e-books have been around for years and are available in a variety of formats from a variety of different storefronts. In fact, Amazon sold digital books long before it introduced the Kindle.

The e-book market has evolved much more quickly than the digital music space, which leaves less wiggle room for retailers, like Amazon, to exert pressure.

However, make no mistake, for smaller publishers, the risk of losing listings on Amazon.com is still probably a big enough threat to have an effect.

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